The Deal: HD Supply, CDW Tally Single-Digit Gains In Debuts
NEW YORK (The Deal) - Two PE-backed companies, HD Supply Holdings Inc.
HD Supply, which distributes building materials to professional contractors, priced its IPO of nearly 53.2 million shares at $18, raising about $957 million, while CDW priced its IPO of nearly 23.3 million shares at $17, raising about $395 million.
Atlanta-based HD Supply, trading under the ticker symbol HDS, closed up 3.7%, to $18.66; CDW, trading under the ticker symbol CDW, closed up 8%, to $18.37.
HD Supply's IPO priced at the bottom of a range that had been cut from its previously expected range of $22 to $25 per share. In that IPO, private equity backers Bain Capital LLC, Carlyle Group and Clayton, Dubilier & Rice LLC retained the 36.5 million shares each owns in HD Supply. At the IPO price of $18, each of the firms' 19.9% stake in the company is valued at $657 million. HD Supply said it received proceeds of $917 million.
HD Supply was sold to a consortium of private equity firms in a 2007 deal that valued the company at $8.5 billion.
But the deal left the company with a substantial debt load -- about $6.6 billion, according to filings -- a factor that could have made investors wary and led to the price cut on the IPO.
The company plans to use proceeds from the offering to retire about $633 million of 10.5% senior subordinated notes due 2021 and $185 million of 11.5% senior notes due 2020.
If the underwriters exercise their option to purchase about 8 million additional shares, HD Supply may have enough proceeds to pay off the entire $950 million of its 10.5% senior subordinated notes due 2021.
HD Supply posted adjusted EBITDA of $683 million on net sales of $8 billion in the fiscal year ended Feb. 3, up from adjusted EBITDA of $508 million on net sales of $7 billion in fiscal year 2012.